A dual-listed company (DLC) structure (also referred to as a “Siamese twin”) involves two companies incorporated in different countries contractually agreeing to operate their businesses as if they were a single enterprise, while retaining their separate legal identity and existing stock exchange listings. In integrated and efficient financial markets, stock prices of the twin pair should move in lockstep. In practice, DLC share prices exhibit large deviations from theoretical parity (see the graph of Royal Dutch/Shell above). Our paper documents the risk and return of arbitrage strategies using a comprehensive sample of 12 DLCs during the period 1980-2002.

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